Crucial 2012 Annual Report Download - page 8

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Product Warranty
Because the design and manufacturing process for semiconductor products is highly complex, it is possible that we may
produce products that do not comply with customer specifications, contain defects or are otherwise incompatible with end
uses. In accordance with industry practice, we generally provide a limited warranty that our products are in compliance with
our specifications existing at the time of delivery. Under our general terms and conditions of sale, liability for certain failures
of product during a stated warranty period is usually limited to repair or replacement of defective items or return of, or a credit
with respect to, amounts paid for such items. Under certain circumstances, we provide more extensive limited warranty
coverage than that provided under our general terms and conditions.
Competition
We face intense competition in the semiconductor memory market from a number of companies, including Elpida Memory,
Inc.; Samsung Electronics Co., Ltd.; SanDisk Corporation; SK Hynix Inc.; Spansion Inc. and Toshiba Corporation. Some of
our competitors are large corporations or conglomerates that may have greater resources to withstand downturns in the
semiconductor markets in which we compete, invest in technology and capitalize on growth opportunities. Our competitors
seek to increase silicon capacity, improve yields, reduce die size and minimize mask levels in their product designs resulting in
significantly increased worldwide supply and downward pressure on prices. Many of our high-volume memory products are
manufactured to industry standard specifications and as such have similar performance characteristics to those of our
competitors. For these high-volume memory products, the principal competitive factors are generally price and performance
characteristics including: operating speed, power consumption, reliability, compatibility, size and form factors. For our other
memory products, the aforementioned performance characteristics generally take precedence to pricing.
Research and Development
Our process technology R&D efforts are focused primarily on development of successively smaller line-width process
technologies which are designed to facilitate our transition to next generation memory products. Additional process technology
R&D efforts focus on the enablement of advanced computing and mobile memory architectures, the investigation of new
opportunities that leverage our core semiconductor expertise and the development of new manufacturing materials. Product
design and development efforts include our high density DDR3 and DDR4 DRAM and Mobile Low Power DDR DRAM
products as well as high density and mobile NAND Flash memory (including MLC and TLC technologies), NOR Flash
memory, specialty memory, phase-change memory, SSDs and other memory technologies and systems.
Our R&D expenses were $918 million, $791 million and $624 million in 2012, 2011 and 2010, respectively. We generally
share R&D process and design costs for NAND Flash with Intel and for DRAM with Nanya. We also share R&D costs for
certain emerging memory technologies with Intel. As a result of reimbursements under our Intel and Nanya cost-sharing
arrangements, our overall R&D expenses were reduced by $225 million, $236 million and $155 million in 2012, 2011 and
2010, respectively.
To compete in the semiconductor memory industry, we must continue to develop technologically advanced products and
processes. We believe that expansion of our semiconductor product offerings is necessary to meet expected market demand for
specific memory solutions. Our process development center and largest design center are located at our corporate headquarters
in Boise, Idaho. In 2012, we commenced operation of our new R&D facility in Boise, which was designed to accommodate
450mm wafer manufacturing. We have several additional product design centers in other strategic locations around the world.
In addition, we develop photolithography mask technology at our MP Mask joint venture facility in Boise.
R&D expenses vary primarily with the number of development wafers processed, the cost of advanced equipment
dedicated to new product and process development, and personnel costs. Because of the lead times necessary to manufacture
our products, we typically begin to process wafers before completion of performance and reliability testing. We deem
development of a product complete once the product has been thoroughly reviewed and tested for performance and reliability.
R&D expenses can vary significantly depending on the timing of product qualification.